The Privatization of Social Housing
Last weekend, I spoke on a panel at the Annual Conference of the Ontario Non-Profit Housing Association. The panel was inspired in large part by the recent debate in Toronto over Mayor Rob Ford’s attempt to sell social housing units to private buyers. The panel, entitled “To Privatize or Not to Privatize? That is the question,” included myself, Vince Brescia (President and CEO of the Federation of Rental-housing Providers of Ontario), John Dickie (President of the Canadian Federation of Apartment Associations), and Margie Carlson (Director of Policy Research and Networks at the Social Housing Services Corporation).
Here are some of my speaking notes:
-Canada already has one of the most private-sector oriented rental housing markets in the OECD. Consider for example our “rate of social renting,” which is the percentage of a jurisdiction’s households that are tenants in social housing. The United Kingdom’s rate of social renting is 18%. In France, it’s 19%; in the Netherlands it’s 34%; and in Sweden it’s 32%. Canada, by contrast, has a rate of social renting of just 5%, which is considerably less than the OECD average.
-Social housing generally refers to government-subsidized housing for low-income households. And there are two main types of costs involved with social housing: capital costs (i.e. bricks and mortar, along with land) and operating costs (i.e. debt servicing, utilities, maintenance, insurance, municipal taxes, etc. that a low-income tenant’s contribution towards rent does not cover). When government funds social housing, almost all of the funding goes to private actors. Virtually all of the capital costs are for private actors, including architects, cost consultants, general contractors, electrical contractors, drywall contractors, paving contractors, engineers, land surveyors, environmental consultants, soils consultants, lawyers and labourers. What’s more, roughly three-quarters of all operating costs go to private actors (mostly for debt servicing). All of which is to say that there’s a bit of a false dichotomy involved in this debate if one pits the private sector squarely off against the public sector.
-What does matter, in my view, is who owns and operates the housing once it’s built. As I’ve argued here, I believe it is much cheaper for government, over the long term, when said housing is owned and operated by a non-profit entity. And I think the rationale is quite simple: the mandate of a non-profit entity is to keep rent low over the long term. Board members of non-profit housing authorities strive to serve low-income households, and they are kept accountable by their members (who are generally low income) at each year’s Annual General Meeting. Further, their corporate by-laws forbid them from personally profiting from increased revenue gained from increasing the rent. And if they ever sell the housing, they are required to do so to an organization with a similar mandate (it must be a “like purpose entity”). By contrast, when such housing is owned and operated by private-sector actors, the incentive structure is turned upside down. Put differently, non-profit entities (such as Toronto Community Housing Corporation) preserve affordability over the long term.
-Another reason for government to own and operate housing for low-income households is that “high-growth” areas need more affordable housing stock, and the private sector cannot be expected to engage in long-term urban planning on behalf of citizens. As I’ve argued here, examples of “high-growth” areas in Toronto that require government to proactively get involved in building affordable housing include Toronto’s waterfront, Whitby, Richmond Hill, Brampton, the Downsview subway area and new suburbs.
(Note: Steve Pomeroy, Greg Suttor and George Fallis were of great assistance in helping me prepare the above information. The usual disclaimer applies.)
Nick Falvo is a Calgary-based research consultant. He has a PhD in public policy.